You want to make income, you need to earn income…now. Without going into specific costs let’s take a fast look at the items to consider and how cash flow may work, or not, for you in an independent practice.
Regardless of whether you choose to buy a practice or start one from scratch the reality is drawing a profit could be years away. Yes, you read that correctly; years away. That’s not designed to scare but rather to make sure you’re fully informed. Absent any other source of income your practice will need to support your physical space in the form of a monthly rent, purchase furniture, equipment and start up materials, potentially pay for support staff, pay for professional dues and insurance, cover the charges from your accountant and tend to the bills from your internet supplier/cell phone/keeping the power on and taxes*. Have you noticed what’s been left out? Marketing to get the word out about your mere existence will cost money and/or your time and time will be spent on the learning curve of ‘how to’ do a practice. It is important in these initial calculations that you at least consider the basic costs you personally need to cover your own expenses, otherwise known as payroll. In the beginning you may be only covering the most basic of your expenses and using savings for extras. To be fair you might use savings for your own personal expenses in their entirety as do many practitioners when they start.
Translation? You will need to bring in and keep enough clients each month to cover those expenses. Starting a practice from scratch means you might have some options to build from a smaller set of mandated expenses (smaller, less expensive space for example) while buying a practice means you will need to be willing to invest a bigger chunk of money up front.
Here’s how the American College of Physicians puts it, “With a start-up practice, it may take 2 to 3 years before you actually have a full schedule and comfortable income. If buying can compress that time line, and you can find the right practice, then investing in an existing practice may be an attractive option.”
One last thought ~ got savings? Savings up front will make your entire endeavor significantly less stressful.
* Please don’t make the mistake of someone I’ve worked with who was surprised to learn her business was a business with the end result being a huge tax bill and multiple penalties from the IRS.